Lion. Thanks so much for the report. Turns out this is caused by the "aggressive" cursor hiding/showing code. I'll just remove that for now. It's what's caused all of the latest (1.0.1A,B,C) Snow Leopard and now Lion issues with the discovery screen. I'll re-enable once it's been throroughly tested.
Thanks for the report, skipbaker. I'll correct, and re-submit to Apple. I'll also post a new beta.